The UK housing market is showing signs of improvement, with an increase in house sales and a rise in market confidence. The latest RICS residential survey released today indicates a positive shift in buyer enquiries and the number of homes being listed for sale.
For the second month in a row, there’s been an upswing in new buyer enquiries, with a net balance of +6%. This shows a sustained interest in purchasing homes despite indications that the recent drop in mortgage rates might not continue. Across the UK, most regions are witnessing a rekindling of buyer interest.
In February, the number of agreed-upon sales stayed relatively unchanged, which suggests a more resilient sales environment compared to the generally negative trend experienced over the past year.
The short-term outlook for sales is optimistic, with expectations for sales activities to increase over the next year. Moreover, the anticipation for a boost in residential sales activity remains positive for the long-term across all UK regions.
An interesting surge in February was the notable rise in new instructions for home sales. The latest net balance of +21% marks the highest such figure since October 2020, offering a shift from the consistently negative trends seen in 2023. Estate agents are now managing an average of 42 properties, which is the most since February 2021. They’ve also observed an uptick in market valuations compared to the same period last year.
Overall, UK house prices are trending downwards but are starting to stabilize, with the February statistics showing the least negative trend since October 2022. In London, prices are showing a slightly stronger turnaround. There’s also a growing sentiment among respondents in England and Wales that house prices will begin rising again within a year.
In the rental market, tenant demand continues to increase, albeit at a slower rate than before. As landlord listings are decreasing, rental prices are expected to rise, although at a reduced pace.
Simon Rubinsohn, the chief economist at RICS, remarked that the February survey brings some optimistic indicators for the sales market, with continued interest from buyers and an increase in new listings. The lasting presence of stock in the market will be crucial in shaping the year’s outcome, especially with new construction expected to be limited. The recent uptick in property assessments suggests a positive shift, potentially bolstered by the recent Capital Gains Tax adjustment in the Budget.
Rubinsohn also notes that while the relentless increase in private rents appears to be easing, the demand still significantly exceeds supply, indicating little respite for tenants. Challenges in the rental sector are being felt due to various measures enacted in recent years.
In response to the RICS’ UK Residential Survey for February 2024, Tom Bill, head of UK residential research at Knight Frank, acknowledged the variations in economic data post-Christmas. However, he points out that the signs are indicating an upward housing market trajectory, coinciding with a likely decline in mortgage rates. He suggests that those in the property market should pay close attention to employment trends, as changes may encourage the Bank to reduce rates, leading to mortgages with lower starting rates.
Regarding the rental market, Bill suggests that despite the Chancellor’s reduction in Capital Gains Tax to motivate landlords to sell, the political intervention may ironically lead to fewer rental properties and consequently higher rents due to reduced availability.
